On Thursday, Mizuho Securities adjusted its financial outlook for MGM Resorts International (NYSE:MGM) stock, reducing its price target to $57 from the previous $62 while keeping an Outperform rating on the stock. The revision reflects concerns over weaker-than-anticipated revenue per available room (RevPAR) in Las Vegas.
The firm reported quarter-to-date data and highlighted several challenges within the industry, including a recent cyber-attack that impacted MGM in the third quarter of 2023. Despite these issues, Mizuho continues to support MGM with an Outperform rating but has recalibrated its price target to reflect the new estimates.
Mizuho's analysis includes adjustments for calendar shifts throughout the quarter, with July losing a day, August gaining two, and September losing two. These movements, however, are seen as secondary to the broader trend of lower RevPAR. Consequently, Mizuho has revised its third-quarter RevPAR growth estimate for MGM Las Vegas to 2%, a decrease from the previously projected 2.5% and significantly below the market consensus of 6.5%.
Looking further ahead, Mizuho has also revised its fourth-quarter 2024 RevPAR forecast for MGM Las Vegas, now expecting an 8% decline compared to the previous estimate of a 2% drop and a market expectation of a 1.5% decrease. Additionally, the firm has tempered its RevPAR outlook for the following year, predicting a 2.5% decline versus its earlier forecast of flat growth.
In other recent news, MGM Resorts International has witnessed growth in its Las Vegas and Macau markets. The firm's second-quarter 2024 earnings call reported a 3% increase in Las Vegas revenues and a significant 37% rise in MGM China (OTC:MCHVY) revenues.
The company's online platform, BetMGM, also turned a profit, largely driven by its iGaming business. Additionally, MGM Resorts has announced plans for substantial investments in luxury resorts on the Las Vegas strip and digital businesses, aiming for mid-teens free cash flow per share growth through 2028.
In another development, MGM Resorts has welcomed hospitality veteran Keith Barr to its Board of Directors. Barr, who previously held the CEO position at IHG Hotels & Resorts, is expected to bring over three decades of industry experience to the MGM Resorts board. The appointment is seen as a strategic move to bolster the company's leadership with his global hospitality expertise.
Meanwhile, in Brazil, the surge in online sports betting has raised concerns over its impact on consumer spending. Brazilians reportedly spent 68.2 billion reais ($12.2 billion) on international betting platforms in the year ending in June.
With the influx of gambling companies registering in Brazil, including MGM Resorts, there are indications that the gambling craze might be diverting funds from the real economy.
Despite these concerns, the gambling industry disputes claims that betting is undermining retail consumption, attributing the downturn to the COVID-19 pandemic's impact on consumer behavior.
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